10 Questions To Evaluate A Disruptive Startup

Question (1) Technology- Can you create a breakthrough technology?

A disruptive startup is built up on a breakthrough technology. Technology is a creative application of doing something and producing a unique-value product. Dot.com revolution has been built on a breakthrough technology on internet, digital transformation and telecommunication that lead to introduce disruptive products such as the smartphones, google, social media platforms and others. These disruptive inventions have been dominating the market since 2000 and will continue for sometimes until it is replaced with another wave of disruptive products. It has been the same case for the old technology cycles such as, the automobile industries, where famous brands like Ford has led the automobile industries in the end of 19th century inventing the T-Model engine cars. As a rule of thumb, a disruptive startup is contributing or creating a breakthrough technology that enables to produce disruptive products targeting new customers and markets. Without this breakthrough technology, the compelling products won’t be created and customers will face challenging times to successfully do their jobs and get red of their pains.

Question (2) Disruption- Have you identified a unique opportunity that others don’t see?

A disruptive startup is involved in producing a compelling products that customers want. To identify these unique opportunities, a disruptive startup gets involved in a validated learning processes to identify a pressing challenge, defining the problem, creating a solution with unique value propositions, problem-solution fit and validation. This unique opportunity or potential business concept will require a disruptive way of thinking in identifying and transforming pressing challenges into a compelling product that many of us are unable to see and do.

Question (3) Customers- Can you make a product or service that customers will compellingly want?

Most of the existing products have failed to be classified as a compelling product because it failed to bring a unique value proposition or solution to the existing and pressing problems that customers are facing to perform or do their jobs. A compelling product is a product or service that brings a unique solution to a pressing problem and the customers will fiercely acquire to perform their job with less pain and with more desired gains. The product is usually produced to create a gain and or relieve a pain for a target customer. To qualify the product to be a disruptive one, a product should offer a unique value proposition or solution, introduce unexpected gains, target new market/customers and be sold with low-end prices that majority of customers can afford to buy. Let us think of the product (smart phone) when it was first introduced to the market during the existence of a fixed-line phone, which was fixed (not seamless), manually used, limited features & benefits, and relatively expensive to use. The smartphone has brought a wide list of solutions or benefits and make it easy to use and becoming a compelling product to customers.

Question (4) Time- Is it the right time to launch your startup?

Time is considered as an important and critical factor for launching a startup or a product. Time of launching is connected with the readiness of the target market and feasibility issues. It will be the right time for launching a startup or a product, when it is launched at the time that is determined by a group of customers and will face low or no competition in market. Let us imagine that an iPhone or Samsung smart phone have been launched recently instead of its actual time of launching, it will be obviously not a compelling product and it may end up to be a failure. Disruptive startup is launched at the right time to capture the business benefits and grow.

Question (5) Monopoly- Are you starting a business with a big share of target market?

Most if not all of the blue-sky or disruptive products launched with a vision to capture the big share of the market. This vision is supported with the disruptive attractions that a new product or startup can offer like, problem-solution fit product, unique value propositions, competitive offering, wanted by a large group of customers. A compelling product is usually acquired by a big share of market due to the reasons of its business attractions acquired by a large group of customers.

Question (6) People- Do you have the right team?

Team is the key success for any project. For the disruptive startup, the owner of the project will be the one to craft the vision of the business and lead the team into validating the business concept and creating the company. During the early searching phases, the team leader will require a small team, who will work to validate the business concept. Small team may initially constitute of marketing officer and data analysis in addition to the business owner. New jobs and headcounts maybe added as the business is progressing. It is also important that the board of advisory is created at early phase to advise and help validating the business. The quality of the team is usually determining through the outcomes and it will be difficult to achieve a disruptive startup without it.

Question (7) Channels- Do you have the right distribution channels?

The distribution channels is playing a key role into the flow of the product and services from the startup to the customers. Channels are varied based on the type of product, service and customers’ requirements. Channels can be physical (wholesalers and retailers) or web-based outlets. Choosing the right set of distribution channels is critical to creating a disruptive startup. The distribution channels perform three distinctive roles as transactional (exchange of product with customers), financial ( those related to cost of distribution and selling prices) and managerial (maintain enough stock and supplies at the distribution channels). A disruptive startup is developing and managing channels in an innovative and disruptive ways that most fit the customer needs.

Question (8) Durability- Will your market position be defensible minimum 10 years into the future?

Disruptive startup usually remains at market with a strong market positioning for at least 10 years. We can recall a lot of examples on this such as, the android smartphones, google, LinkedIn, Facebook, eBay and Amazon, which are successful in the market for more than 10 years. For the disruptive startups, the long duration of market positioning is another evidence of being a disruptive business.

Question (9) Cash- Can your business generate positive & growing cash flows by end of 3rd year operation and onward?

A disruptive startup is a feasible and profitable business. Most of the disruptive technology startups are incurring losses during the first 2-3 years, where a lot of investments are made to create the product and market. Another issue is that it is running with a huge fixed investment and expenditures, that make it difficult to cover these expenditures during the first or second year and until it is successfully operated with achievement of high volume of revenues. Cash flows is a function of achieved profitability, made investments, raised funding and collection of revenues. The disruptive startups will usually begin to generate a healthy cash flows from the 3rd year of operation and on wards showing how profitable is the business.

Question (10) Scalability- Can your startup scale above breakeven and beyond from the 3rd year operation?

A startup without potential growing is worthless. The value of a business is getting attractive and worthy to invest in if it is showing with enough evidences profitability and growth. As stated above, the tech. startup is running with a huge investment and fixed expenditures that make the startup working hard to grow and reach the breakeven and beyond during the first 2-3 years and achieving a reasonable level of profitability and growth. A disruptive startup is operating beyond the breakeven point and growing.

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